Amid the ongoing bankruptcy case of crypto exchange Bittrex US, the US government has opposed the platform’s motion to allow customers to withdraw their crypto assets.
The US government has thwarted a request by Bittrex US, the now bankrupt cryptocurrency exchange, to allow the release of customer funds. The motion, which was launched in response to Bittrex US’s intention to allow customers to withdraw cryptocurrency assets, was opposed by the government which has scheduled a hearing for June 14.
The government argues that Bittrex’s proposal is premature and attempts to unfairly prioritize creditors outside of an approved plan. This claim was influenced by the fact that Bittrex US currently holds a $5 million debt to the Financial Crimes Enforcement Network (FinCEN).
Government demand and controversy
The original Bittrex US motion proposed to rank creditors in order of importance for repayment. However, the government disputes the need for such a categorization, saying that issues related to the ownership of cryptocurrency assets should be resolved before confirming the plan.
Government position on confirming the plan
The government argues that the segmentation of creditors into subordinate categories outside of the confirmation hearing is not appropriate. As such, he insists that the issues in question be discussed after a plan has been established and confirmed.
The government’s legal team further explains: “Whether customers have real interests or claims against debtors is not a question to be resolved now. Clients, at this time, may be permitted to withdraw their cryptocurrency assets, but should be subject to potential avoidance actions upon confirmation if all creditors are not fully indemnified.
Bittrex US has filed for bankruptcy following SEC charges for operating an unregistered stock exchange. Ongoing developments underscore the complexity of bankruptcy cases involving cryptocurrencies and potentially set precedents for similar cases in the future.